Fundamentally Bearish XAU/USD
Good morning fellow traders,
This is my analysis for XAU/USD. I chose this pair because I have noticed a many traders believing there will be bullish reversal. Unfortunately, the fundamentals do not line up with the bullish sentiment. I will breakdown further with why I believe the pair will be bearish:
1. The biggest proponent for the bearish sentiment is the interest rate hikes for the United States dollar that have been occurring and will continue to occur to combat high inflation. This week alone has a high probability for a 75 base point hike that could further drive the value of the Dollar higher.
2. The Commitment of Traders report for Gold Futures shows that while Large Speculators are still net long with 241,004 Long Positions to 146,049 Short Positions, they have removed 10,122 Long Positions and added 13,044 Short Positions from 7/12 to 7/19. Large Speculators have been removing Long Positions and adding Short Positions for rather long time as financial markets are downward from Dollar strength. This means while the market experience a short term bull trend, Large Speculators may be preparing for further downside.
As you can see currently, the market is showing a bearish candle in response to a short range that was rejected (Volume Profile used). The next box is a range that happened after the market recovery from the March 2020 crash.
As with any trade, do you own research and trade at your own risk. I am not a financial advisor. Happy trading!
This is my analysis for XAU/USD. I chose this pair because I have noticed a many traders believing there will be bullish reversal. Unfortunately, the fundamentals do not line up with the bullish sentiment. I will breakdown further with why I believe the pair will be bearish:
1. The biggest proponent for the bearish sentiment is the interest rate hikes for the United States dollar that have been occurring and will continue to occur to combat high inflation. This week alone has a high probability for a 75 base point hike that could further drive the value of the Dollar higher.
2. The Commitment of Traders report for Gold Futures shows that while Large Speculators are still net long with 241,004 Long Positions to 146,049 Short Positions, they have removed 10,122 Long Positions and added 13,044 Short Positions from 7/12 to 7/19. Large Speculators have been removing Long Positions and adding Short Positions for rather long time as financial markets are downward from Dollar strength. This means while the market experience a short term bull trend, Large Speculators may be preparing for further downside.
As you can see currently, the market is showing a bearish candle in response to a short range that was rejected (Volume Profile used). The next box is a range that happened after the market recovery from the March 2020 crash.
As with any trade, do you own research and trade at your own risk. I am not a financial advisor. Happy trading!
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